If the Crowding-Out Effect Is Strong, How Will the Potency

question 39

Multiple Choice

If the crowding-out effect is strong, how will the potency of discretionary fiscal policy be affected?

• A) It will make fiscal policy more potent.
• B) It will make fiscal policy less potent.
• C) The potency of fiscal policy will be unaffected.
• D) The potency of contractionary will be reduced.

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Definitions:

Temporary Accounts

Accounts used to track transactions within a fiscal period, which are reset by transferring the balance to permanent accounts at the end of the period. These include revenues, expenses, and dividends accounts.

Accounting Period

The specific time period during which financial activities are recorded and compiled into financial statements.

Closing Entries

Journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent ones, facilitating the start of a new accounting period.

Accounting Period

A specific period of time for which financial statements are prepared, often a year or a quarter.